UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-12002
ACADIA REALTY TRUST
(Exact name of registrant in its charter)
MARYLAND 23-2715194
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 SOUNDVIEW MARKETPLACE, PORT WASHINGTON, NY 11050
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 767-8830
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of May 4, 2000, there were 25,263,763 common shares of
beneficial interest, par value $.001 per share, outstanding.
ACADIA REALTY TRUST AND SUBSIDIARIES
FORM 10-Q
INDEX
Part I: Financial Information Page
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 1
Consolidated Statements of Operations for
the three months ended March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows for
the three months ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure of Market Risk 20
Part II: Other Information
Item 2. Changes in Securities and Use of Proceeds 21
Item 5. Other Information 21
Item 6. Exhibits 21
Signatures 22
Part I. Financial Information
Item 1. Financial Statements
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31,
2000 December 31,
(unaudited) 1999
----------- ----
ASSETS
Real estate
Land $ 81,956 $ 81,956
Buildings and improvements 478,512 477,573
Properties under development 11,381 9,992
-------- --------
571,849 569,521
Less: accumulated depreciation 95,200 90,932
-------- --------
Net real estate 476,649 478,589
Property held for sale 13,068 13,227
Cash and cash equivalents 13,203 35,340
Cash in escrow 10,419 9,707
Investments in unconsolidated
partnerships 7,160 7,463
Rents receivable, net 8,171 8,865
Prepaid expenses 2,647 2,952
Due from related parties -- 19
Deferred charges, net 13,691 12,374
Other assets 2,323 2,267
-------- --------
$547,331 $570,803
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $308,230 $326,651
Accounts payable and accrued expenses 5,827 6,385
Dividends and distributions payable 4,344 4,371
Other liabilities 3,649 4,224
-------- --------
Total liabilities 322,050 341,631
-------- --------
Minority interest in Operating
Partnership 73,984 74,462
Minority interests in majority
owned partnerships 2,220 2,223
-------- --------
Total minority interests 76,204 76,685
-------- --------
Shareholders' equity:
Common shares, $.001 par value,
authorized 100,000,000 shares,
issued and outstanding 25,294,463
and 25,724,315 shares, respectively 26 26
Additional paid-in capital 165,231 168,641
Deficit (16,180) (16,180)
-------- ---------
Total shareholders' equity 149,077 152,487
-------- ---------
$547,331 $ 570,803
======== =========
See accompanying notes
1
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(in thousands, except per share amounts)
March 31, March 31,
2000 1999
(unaudited) (unaudited)
----------- -----------
Revenues
Minimum rents $ 18,441 $17,353
Percentage rents 751 788
Expense reimbursements 3,844 3,458
Other 827 652
-------- -------
Total revenues 23,863 22,251
-------- -------
Operating Expenses
Property operating 5,986 5,882
Real estate taxes 2,713 2,551
Depreciation and amortization 5,015 4,686
General and administrative 1,293 1,466
-------- -------
Total operating expenses 15,007 14,585
-------- -------
Operating income 8,856 7,666
Equity in earnings of un-
consolidated partnerships 200 183
Loss on sale of properties -- (1,284)
Interest expense (6,355) (5,424)
-------- -------
Income before
minority interest 2,701 1,141
Minority interest (827) (376)
-------- -------
Net income $ 1,874 $ 765
======== =======
Net income per Common Share -
basic and diluted $ .07 $ .03
======== =======
See accompanying notes
2
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(in thousands)
March 31, March 31,
2000 1999
(unaudited) (unaudited)
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,874 $ 765
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,015 4,686
Minority interests 827 376
Equity in income of unconsolidated
partnerships (200) (183)
Provision for bad debts 227 355
Stock-based compensation 197 --
Loss on sale of property -- 1,284
Changes in assets and liabilities:
Funding of escrows, net (712) (658)
Rents receivable 467 (920)
Prepaid expenses 305 447
Due to related parties 19 (120)
Other assets (115) 37
Accounts payable and accrued expenses (558) (2,748)
Other liabilities (575) (686)
------- --------
Net cash provided by operating activities 6,771 2,635
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and
improvements (2,440) (10,970)
Net proceeds from sale of property -- 6,128
Distributions from unconsolidated partnerships 503 --
Payment of deferred leasing costs (668) (105)
------- --------
Net cash used in investing activities (2,605) (4,947)
------- --------
See accompanying notes
3
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(in thousands)
March 31, March 31,
2000 1999
(unaudited) (unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgages $ (59,421) $ (975)
Proceeds received on mortgage notes 41,000 4,250
Payment of deferred financing and
other costs (1,066) (405)
Dividends paid (3,089) --
Distributions to minority interests in
Operating Partnership (1,258) --
Distributions on preferred Operating
Partnership units (23) --
Repurchase of Common Shares (2,446) --
--------- -------
Net cash (used in) provided by financing
activities (26,303) 2,870
--------- -------
(Decrease) increase in cash and cash equivalents (22,137) 558
Cash and cash equivalents, beginning of period 35,340 15,183
--------- -------
Cash and cash equivalents, end of period $ 13,203 $15,741
========= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, net of
amounts capitalized of $169 and $372,
respectively $ 6,360 $ 6,095
========= ========
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of real estate by assumption
of debt $ 7,661
========
See accompanying notes
4
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
1. THE COMPANY
Acadia Realty Trust (the "Company") is a fully integrated and self-managed real
estate investment trust ("REIT") focused primarily on the ownership,
acquisition, redevelopment and management of neighborhood and community shopping
centers, and multi-family properties.
All of the Company's assets are held by, and all of its operations are conducted
through, Acadia Realty Limited Partnership (the "Operating Partnership") and its
majority owned partnerships. As of March 31, 2000, the Company controlled 71% of
the Operating Partnership as the sole general partner.
The Company currently operates fifty-eight properties, which it owns or has an
ownership interest in, consisting of forty-seven neighborhood and community
shopping centers, three enclosed malls, two mixed-use properties (a
retail/office center and a retail/residential property), five multi-family
properties and one redevelopment property located in the Eastern and Midwestern
regions of the United States. The retail/office center was held for sale as of
March 31, 2000.
2. BASIS OF PRESENTATION
The consolidated financial statements include the consolidated accounts of the
Company and its majority owned partnerships, including the Operating
Partnership, and have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Non-controlling investments in partnerships are accounted for under the equity
method of accounting as the Company exercises significant influence. The
information furnished in the accompanying consolidated financial statements
reflects all adjustments which are, in the opinion of management, necessary for
a fair presentation of the aforementioned consolidated financial statements for
the interim periods. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes.
5
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
2. BASIS OF PRESENTATION, CONTINUED
Actual results could differ from these estimates. Operating results for the
three month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2000. For
further information refer to the consolidated financial statements and
accompanying footnotes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
3. SHAREHOLDERS' EQUITY AND MINORITY INTERESTS
The following table summarizes the change in the shareholders' equity and
minority interests since December 31, 1999:
Minority Minority
interests in interests in
Shareholders' Operating majority owned
Equity Partnership(1) partnerships
Balance at December 31, 1999 $152,487 $74,462 $ 2,223
Repurchase of Common Shares (2,446) -- --
Reissuance of treasury shares 197 -- --
Dividends and distributions declared
of $0.12 per Common Share and
Operating Partnership ("OP") Unit (3,035) (1,258) --
Net income for the period January 1
through March 31, 2000 1,874 780 (3)
-------- ------- --------
Balance at March 31, 2000 $149,077 $73,984 $ 2,220
======== ======= ========
(1) Net income attributable to minority interest in Operating Partnership and
distributions do not include a distribution on Preferred OP Units of $50.
Minority interests in Operating Partnership represent the limited partners'
interest of 10,484,143 and 11,184,143 units in the Operating Partnership
("Common OP Units") at March 31, 2000 and 1999, respectively, and 2,212 units of
preferred limited partnership interests (Preferred OP Units), with a nominal
value of $1,000 per unit, which are entitled to a preferred quarterly
distribution of $22.50 per unit (9% annually). Minority interests in majority
owned partnerships represent interests held by third parties in four
partnerships in which the Company has a majority ownership position.
6
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
4. INVESTMENT IN PARTNERSHIPS
The Company owns a 49% interest in the Crossroads Joint Venture and Crossroads
II Joint Venture (collectively "Crossroads") and accounts for this investment
using the equity method. Summary financial information of the Crossroads and the
Company's investment in and share of income from Crossroads follows:
March 31, December 31,
2000 1999
---- ----
Balance Sheet
Assets:
Rental property, net $ 8,690 $ 8,801
Other assets 5,014 5,204
-------- --------
Total assets $ 13,704 $ 14,005
======== ========
Liabilities and partners' equity
Mortgage note payable $ 34,993 $35,105
Other liabilities 781 777
Partners' equity (22,070) (21,877)
-------- -------
Total liabilities and partners' equity $ 13,704 $14,005
======== =======
Company's investment in partnerships $ 7,160 $ 7,463
======== =======
March 31, March 31,
2000 1999
---- ----
Statement of Operations
Total revenue $ 1,865 $ 1,803
Operating and other expenses 458 463
Interest expense 667 634
Depreciation and amortization 133 132
-------- --------
Net income $ 607 $ 574
======== ========
Company's share of net income $ 298 $ 281
Amortization of excess investment
(See below) 98 98
-------- --------
Income from partnerships $ 200 $ 183
======== ========
The unamortized excess of the Company's investment over its share of the net
equity in Crossroads at the date of acquisition was $19,580. The portion of this
excess attributable to buildings and improvements is being amortized over the
life of the related property.
7
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
5. MORTGAGE LOANS
On January 31, 2000, the Company repaid $23,090 of outstanding debt with a life
insurance company from working capital. The remaining outstanding debt of
$30,735 with this lender was fully repaid with the proceeds from the March 30,
2000 bank financing as described below.
On February 8, 2000, the Company closed on a revolving credit facility with a
bank, which provides for the borrowing of up to $7,400. The facility, which is
secured by one of the Company's properties, matures in March 2003 and requires
the monthly payment of interest at the rate of LIBOR plus 150 basis points (the
rate increases by an additional 25 basis points if the amount outstanding under
the facility exceeds 50% of the value of the collateral). The monthly repayment
of principal amortized over 25 years is required only if the Company draws the
full amount available under the facility. As of March 31, 2000, the Company had
not drawn any amounts under this facility.
On March 23, 2000, the Company fully repaid $4,600 of outstanding debt with a
bank which was collateralized by one of the Company's properties.
On March 30, 2000, the Company closed on a $59,000 secured financing line with a
bank (the "Line"). The Line is secured by five of the seven properties that
collateralized a loan with a life insurance company which was retired using
$30,735 of the proceeds from the initial $36,000 funding. The balance of the
Line must be drawn by April 2001. The Line matures April 1, 2005 and requires
the monthly payment of interest at a variable-rate of LIBOR + 175 basis points
and principal amortized over 30 years. After September 2001, the debt can be
prepaid without prepayment or yield maintenance fees. As of March 31, 2000,
$36,000 was outstanding under the Line.
6. RELATED PARTY TRANSACTIONS
The Company manages three properties in which certain current shareholders of
the Company or their affiliates have ownership interests. Management fees earned
by the Company under these contracts are at rates ranging from 3.0% to 3.5%.
Such fees aggregated $237 and $143 during the three month periods ended March
31, 2000 and 1999, respectively.
7. DIVIDENDS AND DISTRIBUTIONS PAYABLE
On February 29, 2000, the Board of Trustees of the Company approved and declared
a cash quarterly dividend for the quarter ended March 31, 2000 of $0.12 per
Common Share and Common OP Unit. The dividend was paid on April 17, 2000 to the
shareholders of record as of March 31, 2000. The Board of Trustees also approved
a distribution of $22.50 per Preferred OP Unit which was paid on April 17, 2000
as well.
8
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
8. PER SHARE DATA
For the three month periods ended March 31, 2000 and 1999, basic earnings per
share was determined by dividing the net income applicable to common
shareholders for each period by the weighted average number of common shares of
beneficial interest ("Common Shares") outstanding during each period consistent
with the Financial Accounting Standards Board Statement No. 128. The weighted
average number of shares outstanding for the three month periods ended March 31,
2000 and 1999 were 25,476,098 and 25,419,215, respectively.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue Common Shares were exercised or converted
into Common Shares or resulted in the issuance of Common Shares that then shared
in the earnings of the Company. For the three month periods ended March 31, 2000
and 1999 no additional shares were reflected as the impact would be
anti-dilutive in such years.
9. SEGMENT REPORTING
The Company has two reportable segments: retail properties and multi-family
properties. The Company evaluates property performance primarily based on net
operating income before depreciation, amortization and certain non-recurring
items. The reportable segments are managed separately due to the differing
nature of the leases and property operations associated with the retail versus
residential tenants.
March 31, 2000
--------------
Retail Multi-Family All
Properties Properties Other Total
---------- ------------ ----- -----
Revenues $ 19,482 $ 3,791 $ 590 $ 23,863
Property operating expenses and
real estate taxes 7,274 1,425 - 8,699
Net property income before depreciation,
amortization and certain nonrecurring items 12,208 2,366 590 15,164
Depreciation and amortization 4,395 498 122 5,015
Interest expense 5,239 1,066 50 6,355
Real estate at cost 489,387 82,462 - 571,849
Total assets 454,171 86,000 7,160 547,331
Gross leasable area (multi-family - 2,273 units) 8,817 2,039 - 10,856
Expenditures for real estate and improvements 2,124 316 - 2,440
Reconciliation to income before
minority interest
Net property income before depreciation,
amortization and certain nonrecurring items $ 15,164
Depreciation and amortization (5,015)
General and administrative (1,293)
Equity in earnings of unconsolidated
partnerships 200
Interest expense (6,355)
--------
Income before minority interest $ 2,701
========
9
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
9. SEGMENT REPORTING (continued)
March 31, 1999
--------------
Retail Multi-Family All
Properties Properties Other Total
---------- ------------ ----- -----
Revenues $ 18,260 $ 3,694 $ 297 $ 22,251
Property operating expenses and
real estate taxes 7,043 1,390 - 8,433
Net property income before depreciation,
amortization and certain nonrecurring items 11,217 2,304 297 13,818
Depreciation and amortization 4,253 433 4,686
Interest expense 4,406 1,018 - 5,424
Real estate at cost 488,478 81,219 - 569,697
Total assets 446,953 82,383 7,699 537,035
Gross leasable area (multi-family - 2,273 units) 8,561 2,039 - 10,600
Expenditures for real estate and improvements 10,717 253 - 10,970
Reconciliation to income before
minority interest
Net property income before depreciation,
amortization and certain nonrecurring items $ 13,818
Depreciation and amortization (4,686)
General and administrative (1,466)
Equity in earnings of unconsolidated
partnerships 183
Loss on sale of property (1,284)
Interest expense (5,424)
--------
Income before minority interest $ 1,141
========
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is based on the consolidated financial statements of
Acadia Realty Trust (the "Company") as of March 31, 2000 and 1999 and for the
three months then ended. This information should be read in conjunction with the
accompanying consolidated financial statements and notes thereto.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions, which will, among other things, affect demand for
rental space, the availability and creditworthiness of prospective tenants,
lease rents and the availability of financing; adverse changes in the Company's
real estate markets, including, among other things, competition with other
companies; risks of real estate development and acquisition; governmental
actions and initiatives; and environmental/safety requirements.
RESULTS OF OPERATIONS
Comparison of the three month period ended March 31, 2000 ("2000") to the three
month period ended March 31, 1999 ("1999")
Total revenues increased $1.6 million, or 7%, to $23.9 million for 2000 compared
to $22.3 million for 1999.
Minimum rents increased $1.0 million, or 6%, to $18.4 million for 2000 compared
to $17.4 million for 1999. $591,000 of this increase was a result of the
retenanting of the Ledgewood Mall, which included the installation of Wal*Mart
and Circuit City, both of which commenced paying rent in March 1999. The
acquisition of the Mad River Shopping Center in February 1999 and the Pacesetter
Park Shopping Center in November 1999 ("1999 Acquisitions") contributed $466,000
to the increase in minimum rents. The redevelopment of 239 Greenwich Avenue,
which was completed in December of 1999, contributed $395,000 to the increase in
minimum rents as well. These increases were partially offset by a $213,000
decline in minimum rents following the sale of the Searstown Mall in February
1999 and the Auburn Plaza in March 1999 ("1999 Dispositions").
Expense reimbursements increased $386,000, or 11%, from $3.4 million for 1999 to
$3.8 million for 2000. The 1999 Acquisitions contributed $196,000 to the
increase. Ledgewood Mall also contributed $118,000 to the increase, primarily as
a result of the retenanting of the property. The balance of the increase was due
to an increase in expense reimbursements in the balance of the portfolio
primarily as a result of increases in reimbursable operating expenses and real
estate taxes. These increases were partially offset by a $102,000 decrease as a
result of the 1999 Dispositions.
Other income increased $175,000 for 2000 which was primarily a result of $95,000
in additional third-party property management fees earned in 2000 and a $91,000
increase in interest income due to greater interest earning assets in 2000.
Total operating expenses increased $422,000, or 3%, to $15.0 million for 2000,
from $14.6 million for 1999.
Property operating expenses increased $104,000, or 2%, to $6.0 million for 2000
compared to $5.9 million for 1999. Of this increase, $156,000 was attributable
to the 1999 Acquisitions. The remaining increase, throughout the balance of the
portfolio, was in reimbursable operating expenses which also resulted in an
increase in expense reimbursement income as previously discussed. These
increases were partially offset by the $129,000 decrease following the 1999
Dispositions.
Real estate taxes increased $162,000, or 6%, from $2.5 million for 1999 to $2.7
million for 2000. The 1999 Acquisitions contributed $112,000 of this increase.
The balance of the increase was experienced throughout the balance of the
portfolio. The 1999 Dispositions resulted in an $83,000 decrease in real estate
taxes.
11
RESULTS OF OPERATIONS, continued
Depreciation and amortization increased $329,000, or 7%, from $4.7 million for
1999 to $5.0 million for 2000. Depreciation increased $227,000 and amortization
expense increased $102,000. Depreciation related to the redevelopment costs for
239 Greenwich Avenue and installation costs associated with the retenanting of
the Ledgewood Mall contributed $144,000 to the increase in depreciation expense.
The 1999 Acquisitions also contributed $76,000 to the increase. The increase in
amortization expense was primarily attributable to the amortization of financing
costs related to additional financings in 1999 and 2000.
General and administrative expense decreased $173,000, or 12%, from $1.5 million
for 1999 to $1.3 million for 2000, which was primarily attributable to a $50,000
decrease in expenses in 2000 following the relocation of the Pennsylvania
regional office and lower third-party professional fees in 2000.
Interest expense of $6.4 million for 2000 increased $931,000, or 17%, from $5.4
million for 1999 primarily attributable to the higher average outstanding
borrowings related to property acquisition and redevelopment activities.
Funds from Operations
The Company, along with most industry analysts, considers funds from operations
("FFO") as defined by the National Association of Real Estate Investment Trusts
("NAREIT") as an appropriate supplemental measure of operating performance.
However, FFO does not represent cash generated from operations as defined by
generally accepted accounting principles and is not indicative of cash available
to fund cash needs. It should not be considered as an alternative to net income
for the purpose of evaluating the Company's performance or to cash flows as a
measure of liquidity.
Generally, NAREIT defines FFO as net income (computed in accordance with
generally accepted accounting principles) before gains (losses) on sales of
property, plus depreciation on real estate and amortization of capitalized
leasing costs, and after adjustments for unconsolidated partnerships and joint
ventures on the same basis. The reconciliation of net income to FFO for the
three month periods ended March 31, 2000 and 1999 is as follows:
For the quarter ended
March 31,
2000 1999
---------- -----------
Net income $1,874 $ 765
Depreciation of real estate and amortization of
leasing costs:
Wholly owned and consolidated
partnerships 4,737 4,514
Unconsolidated partnerships 156 155
Income attributable to minority interest in
Operating Partnership (a) 780 376
Loss on sale of property -- 1,284
------ ------
Funds from operations $7,547 $7,094
====== ======
Funds from operations per share (b) $ 0.21 $ 0.19
====== ======
(a) Does not include distributions paid to Preferred OP Unitholders for the
quarter ended March 31, 2000.
(b) Assumes full conversion of a weighted average 10,484,143 and 11,184,143
Common OP Units into Common Shares for the quarter ended March 31, 2000 and
1999.
12
LIQUIDITY AND CAPITAL RESOURCES
General
The Company's principal uses of its liquidity are expected to be for
distributions to its shareholders and OP unitholders, debt service and loan
repayments, and property investment which includes acquisition, redevelopment,
expansion and retenanting activities. In order to qualify as a REIT for Federal
income tax purposes, the Company must currently distribute at least 95% of its
taxable income to its shareholders. Effective 2001, the requirement will be
reduced to 90% pursuant to the REIT Modernization Act passed in 1999. On
February 29, 2000, the Board of Trustees of the Company approved and declared a
cash quarterly dividend for the quarter ended March 31, 2000 of $0.12 per Common
Share and Common Operating Partnership unit. The dividend was paid on April 17,
2000 to the shareholders of record as of March 31, 2000. The Board of Trustees
also approved a distribution of $22.50 per Preferred OP Unit which was paid on
April 17, 2000 as well.
During the quarter ended March 31, 2000, the Company's share repurchase program
was also a use of liquidity. For the three months ended March 31, 2000, the
Company purchased 471,300 shares at a total cost of $2.4 million. Cumulatively,
through March 31, 2000, the Company had repurchased 866,200 shares at a total
cost of $4.4 million under the share repurchase program. The program, which
allows for the repurchase of up to $10.0 million of the Company's outstanding
Common Shares on the open market, may be discontinued or extended at any time
and there is no assurance that the Company will purchase the full amount
authorized.
Sources of capital for funding property acquisition, redevelopment, expansion
and retenanting, as well as repurchase of common stock are expected to be
obtained from cash on hand, additional debt financings, sales of existing
properties and additional equity offerings. As of March 31, 2000, the Company
has $23.0 million available under a financing line with a bank as well as $7.4
available under a revolving credit facility with another bank. The Company also
has eleven properties that are currently unencumbered and therefore available as
potential collateral for future borrowings. The Company anticipates that cash
flow from operating activities will continue to provide adequate capital for all
debt service payments, recurring capital expenditures and REIT distribution
requirements.
Financing and Debt
As of March 31, 2000 interest on the Company's mortgage indebtedness ranged from
7.2% to 9.6% with maturities that ranged from June 2000 to March 2022. Of the
total outstanding debt, $199.9 million, or 65%, was carried at fixed interest
rates with a weighted average of 8.3%, and $108.3 million, or 35%, was carried
at variable rates with a weighted average of 7.8%. Of the total outstanding
debt, $82.2 million will become due by 2001, with scheduled maturities of $41.0
million at an interest rate of 7.8% in 2000 and $41.2 million at an interest
rate of 7.8% in 2001. The Company expects to refinance this maturing debt or
select other alternatives based on market conditions at that time, although
there can be no assurance as to the consummation or terms of such refinancings.
The following summarizes certain significant financing transactions completed
since December 31, 1999:
On January 31, 2000, the Company paid down $23.0 million of outstanding debt
with a life insurance company from working capital. The remaining outstanding
debt of $30.1 million with this lender was fully repaid with the proceeds from
the March 30, 2000 bank financing as described below.
On February 8, 2000, the Company closed on a revolving credit facility with a
bank, which provides for the borrowing of up to $7.4 million. The facility,
which is secured by one of the Company's properties, matures in March 2003 and
requires the monthly payment of interest at the rate of LIBOR plus 150 basis
points (the rate increases by an additional 25 basis points if the amount
outstanding under the facility exceeds 50% of the value of the collateral). The
monthly repayment of principal amortized over 25 years is required only if the
Company draws the full amount available under the facility. As of March 31,
2000, the Company had not drawn any amounts under this facility.
On March 23, 2000, the Company fully repaid $4.6 million of outstanding debt
with a bank which was collateralized by one of the Company's properties.
13
Financing and Debt, continued
On March 30, 2000, the Company closed on a $59.0 million secured financing line
with a bank (the "Line"). The Line is secured by five of the seven properties
that collateralized a loan with a life insurance company which was retired using
$30.1 million of the proceeds from the initial $36.0 million funding. The
balance of the Line must be drawn by April 2001. The Line matures April 1, 2005
and requires the monthly payment of interest at a variable-rate of LIBOR + 175
basis points and principal amortized over 30 years. After September 2001, the
debt can be prepaid without prepayment or yield maintenance fees. As of March
31, 2000, $36.0 million was outstanding under the Line.
The following table summarizes the Company's mortgage indebtedness as of March
31, 2000:
March 31, December 31, Interest
2000 1999 Rate
------------ ------------ --------
Mortgage notes payable - variable-rate
General Electric Capital Corp. $ 7,098 $ 7,126 8.76% (Commercial paper rate +2.75%)
Fleet Bank, N.A. 3,952 3,966 7.66% (LIBOR + 1.75%)
Fleet Bank, N.A. 9,298 9,326 7.69% (LIBOR + 1.78%)
Sun America Life Insurance Company 13,889 13,931 8.09% (LIBOR + 2.05%)
Sun America Life Insurance Company 9,948 9,979 8.05% (LIBOR + 2.05%)
KBC Bank 14,441 14,508 7.16% (LIBOR + 1.25%)
First Union National Bank 13,729 13,750 7.56% (LIBOR + 1.65%)
Dime Savings Bank of NY 36,000 -- 7.94% (LIBOR + 1.75%)
-------- --------
Total variable-rate debt 108,355 72,586
-------- --------
Mortgage notes payable - fixed rate
John Hancock Mutual Life Insurance Company -- 53,878 9.11%
Metropolitan Life Insurance Company 41,000 41,000 7.75%
Sun America Life Insurance Company 41,921 42,143 7.75%
Huntoon Hastings Capital Corp. 6,222 6,222 7.50%
North Fork Bank 9,978 5,000 7.75%
M&T Real Estate Inc. -- 4,628 8.18%
Anchor National Life Insurance Company 3,844 3,866 7.93%
Lehman Brothers Holdings, Inc. 17,929 17,973 8.32%
Mellon Mortgage Company 7,536 7,566 9.60%
Northern Life Insurance Company 3,112 3,173 7.70%
Bankers Security Life 2,145 2,189 7.70%
Morgan Stanley Mortgage Capital 43,925 44,092 8.84%
Nomura Asset Capital Corporation 22,263 22,335 9.02%
-------- --------
Total fixed-rate debt 199,875 254,065
-------- --------
$308,230 $326,651
======== ========
Properties Payment
Maturity Encumbered Terms
-------- ---------- -------
Mortgage notes payable - variable-rate
General Electric Capital Corp. 01/01/02 (1) (19)
Fleet Bank, N.A. 03/15/02 (2) (19)
Fleet Bank, N.A. 05/31/02 (3) (19)
Sun America Life Insurance Company 08/01/02 (4) (19)
Sun America Life Insurance Company 10/01/02 (5) (19)
KBC Bank 12/31/02 (6) (19)
First Union National Bank 01/01/05 (7) (19)
Dime Savings Bank of NY 04/01/05 (8) (19)
Mortgage notes payable - fixed rate
Metropolitan Life Insurance Company 06/01/00 (9) (20)
Sun America Life Insurance Company 01/01/01 (10) $346(19)
Huntoon Hastings Capital Corp. 09/01/02 (11) (21)
North Fork Bank 12/01/02 (12) $38(19)
M&T Real Estate Inc. -- -- --
Anchor National Life Insurance Company 01/01/04 (13) $33(19)
Lehman Brothers Holdings, Inc. 03/01/04 (14) $139(19)
Mellon Mortgage Company 05/23/05 (15) $70(19)
Northern Life Insurance Company 12/01/08 (16) $41(19)
Bankers Security Life 12/01/08 (16) $28(19)
Morgan Stanley Mortgage Capital 11/01/21 (17) $380(19)
Nomura Asset Capital Corporation 03/11/22 (18) $193(19)
14
Financing and Debt, continued
Notes:
(1) Soundview Marketplace (9) Valmont Plaza (17) Midway Plaza
Luzerne Street Plaza Northside Mall
(2) Town Line Plaza Green Ridge Plaza New Smyrna Beach
Crescent Plaza Cloud Springs Plaza
(3) Smithtown Shopping Center East End Centre Troy Plaza
Martintown Plaza
(4) Merrillville Plaza (10) Bloomfield Town Square Kings Fairgrounds
Atrium Mall Shillington Plaza
(5) Village Apartments Walnut Hill Shopping Center Dunmore Plaza
GHT Apartments Kingston Plaza
(6) Marley Run Apartments Colony Apartments Twenty Fifth Street Shopping Center
Circle Plaza
(7) 239 Greenwich Avenue (11) Gateway Mall Mountainville Plaza
Birney Plaza
(8) New Loudon Centre (12) The Branch Shopping Center Monroe Plaza
Ledgewood Mall Ames Plaza
Bradford Towne Centre Plaza 15
Berlin Shopping Center
Route 6 Mall (13) Pittston Plaza (18) Northwood Centre
(14) Glen Oaks Apartments (19) Monthly principal and interest
(15) Mad River Station Shopping (20) Interest only monthly
Center
(16) Manahawkin Shopping Center (21) Interest only until 5/01;
principal and interest thereafter
15
Property Investment activities
The Company's acquisition program focuses on acquiring sub-performing
neighborhood and community shopping centers that are well-located and creating
significant value through retenanting, timely capital improvements and property
redevelopment. In considering acquisitions, the Company focuses on quality
shopping centers located in the Northeast, Mid-Atlantic, Southeast and Midwest
regions. The Company considers both single assets and portfolios in its
acquisition program. In conjunction with evaluating potential portfolio
acquisitions, the Company also regularly engages in discussions with public and
private entities regarding business combinations as well. Furthermore, the
Company may, from time to time, consider acquiring multi-family apartment
complexes as well as engaging in joint ventures related to property acquisition
and development. The Company also periodically identifies certain properties for
disposition and redeploys the capital to existing centers or acquisitions with
greater potential for capital appreciation.
Property Redevelopment and Retenanting
During 1999, the Company received municipal approval to renovate and expand by
approximately 30,000 square feet the 125,000 square foot Elmwood Park Shopping
Center. As part of the redevelopment, the Company is planning to construct a
48,000 square foot free-standing A&P supermarket, replacing a 28,000 square foot
in-line Grand Union supermarket at a significantly higher rent per square foot.
The Company expects redevelopment costs of approximately $8.7 million through
2001 to complete this project. The Operating Partnership is also obligated to
issue additional Common OP Units with a total value of $2.8 million upon the
completion of this project and the commencement of rental payments from the A&P
supermarket.
The Company is also in the early stages of redeveloping two additional centers,
the Atrium Mall in Abington, Pennsylvania and the Gateway Mall (formerly the
Mall 189), located in Burlington, Vermont. The Company currently estimates these
projects will require approximately $7.0 million through 2002 to fund their
redevelopment.
During the quarter ended March 31, 2000, the Company signed three leases in
connection with the re-anchoring of three properties, the New Loudon Shopping
Center in Latham, New York, the Northside Mall in Dothan, Alabama, and the
Bloomfield Town Square in Bloomfield Hills, Michigan. In January 2000, the
Company signed a lease with Ames Department Stores for 76,000 square feet at the
New Loudon Center and in March 2000, the Company signed a lease with Stein Mart
for 36,000 square feet at the Northside Mall. Also in March 2000, the Company
leased 37,000 square feet to HomeGoods, an affiliate of the TJX Company, at the
Bloomfield Hills property. The total anticipated installation costs for these
three tenants, including the buyout cost of one of the former tenant's lease,
are anticipated to be approximately $2.8 million.
16
HISTORICAL CASH FLOW
The following discussion of historical cash flow compares the Company's cash
flow for the three month period ended March 31, 2000 ("2000") with the Company's
cash flow for the three month period ended March 31, 1999 ("1999").
Net cash provided by operating activities increased from $2.6 million for 1999
to $6.8 million for 2000. This variance was primarily attributable to an
increase in operating income before non-cash expenses in 2000 and $2.3 million
of additional cash used in 1999 for the payment of accounts payable and accrued
expenses.
Investing activities used $2.6 million during 2000, representing a $2.3 million
decrease from $4.9 million of cash used during 1999. This was the result of an
$8.0 million decrease in expenditures for real estate acquisitions, development
and tenant installation in 2000 and $503,000 of distributions received from an
unconsolidated subsidiary partnership in 2000, offset by net sales proceeds of
$6.1 million received in 1999 following the sale of two properties.
Net cash used in financing activities of $26.3 million for 2000 decreased $29.2
million compared to $2.9 million provided in 1999. The decrease resulted
primarily from $58.4 million of additional cash used in 2000 for the repayment
of debt, dividends and distributions of $4.4 million being paid in 2000 and $2.5
million of additional cash used in 2000 for the repurchase of common shares.
This was partially offset by an increase of $36.8 million of cash provided by
additional borrowings.
17
INFLATION
The Company's long-term leases contain provisions designed to mitigate the
adverse impact of inflation on the Company's net income. Such provisions include
clauses enabling the Company to receive percentage rents based on tenants' gross
sales, which generally increase as prices rise, and/or, in certain cases,
escalation clauses, which generally increase rental rates during the terms of
the leases. Such escalation clauses are often related to increases in the
consumer price index or similar inflation indexes. In addition, many of the
Company's leases are for terms of less than ten years, which permits the Company
to seek to increase rents upon re-rental at market rates if rents are below the
then existing market rates. Most of the Company's leases require the tenants to
pay their share of operating expenses, including common area maintenance, real
estate taxes, insurance and utilities, thereby reducing the Company's exposure
to increases in costs and operating expenses resulting from inflation.
Item 3. Quantitative and qualitative disclosures about market risk
The Company's primary market risk exposure is to changes in interest rates
related to the Company's mortgage debt. See the discussion under Item 2. of this
report for certain quantitative details related to the Company's mortgage debt.
Currently, the Company manages its exposure to fluctuations in interest rates
primarily through the use of fixed-rate debt and LIBOR rate caps. As of March
31, 2000, the Company had total mortgage debt of $308.2 million of which $199.9
million, or 65%, is fixed-rate and $108.3 million, or 35%, is variable-rate
based upon either LIBOR or the lender's commercial paper rate, plus certain
spreads. As of March 31, 2000, $23.8 million of notional variable-rate debt was
covered under contracts capping LIBOR at a weighted average of 6.5%. Of the
total outstanding debt, $41.0 million of fixed-rate debt, which currently bears
interest at 7.8%, will become due during 2000. As the Company intends on
refinancing such debt at the then-existing market interest rates which may be
greater than the current interest rate, the Company's interest expense would
increase by approximately $103,000, if the interest rate on the refinanced debt
increased by 25 basis points. The Company may seek additional variable-rate
financing if and when pricing and other commercial and financial terms warrant.
As such, the Company would consider further hedging against the interest rate
risk related to such variable-rate debt through interest rate caps or other
means.
18
Part II. Other Information
Item 1. Legal Proceedings
There have been no material legal proceedings beyond those previously
disclosed in the Registrants previously filed Annual Report on Form
10-K for the year ended December 31, 1999.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Extension of Institutional Investor Lock-up dated March 23, 2000 as
further discussed in the attached press release - Exhibit 99.
Item 6. Exhibits and Reports on Form 8-K
The following exhibit is included herein:
27 Financial Data Schedule (EDGAR filing only)
99 Press release dated March 23, 2000 announcing the extension of
Institutional Investor Lock-up
(b) Reports on Form 8-K
The following Form 8-K was filed on April 6, 2000
1) Form 8-K filed April 6, 2000 (earliest event
April 6, 2000), reporting in Item 5. certain
supplemental information concerning the ownership,
operations and portfolio of the Company as of
December 31, 1999.
19
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACADIA REALTY TRUST
By: /s/ Ross Dworman
Chairman and Chief Executive
Officer (Principal Executive
Officer)
/s/ Perry Kamerman
Senior Vice President of Finance
(Principal Financial and
Accounting Officer)
Date: May 10, 2000
20
5
3-MOS
DEC-31-2000
MAR-31-2000
13,203
0
9,952
1,781
0
0
571,849
95,200
547,331
0
308,230
0
0
26
149,051
547,331
0
23,863
0
15,007
0
0
6,355
1,874
0
1,874
0
0
0
1,874
0.07
0.07
[LOGO]
FOR IMMEDIATE RELEASE
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD
- --------------- --------------------------------
Jon Grisham, Investor Relations Kerry Thalheim, General Inquiries
516-767-7550 212-661-8030
ACADIA REALTY TRUST ANNOUNCES
THE EXTENSION OF KEY INSTITUTIONAL
INVESTOR LOCK-UP
IMPORTANT VOTE OF CONFIDENCE FROM LARGEST INSTITUTIONAL SHAREHOLDERS
New York, NY (March 23, 2000) - Acadia Realty Trust (NYSE:AKR), a fully
integrated shopping center real estate investment trust ("REIT"), today
announced that the institutional investors (the "Investors") which invested over
$115,000,000 in the August 1998 recapitalization of the company have agreed to
extend their lock-up agreement to the end of the year. In August 1998, Investors
had agreed to a lock-up which by its terms will expire on or before March 28,
2000. The number of shares which would become unlocked is [17,061,238]
representing 63.9% of the outstanding common shares. The Investors, which are
the limited partners of RD Properties L.P. VI, RD Properties L.P. VIA and RD
Properties L.P. VIB, will be issued shares in their individual names. If not for
the lock-up agreement, the shares could trade on the open market.
Kenneth F. Bernstein, President of Acadia, said, "Our institutional investors
have given a strong vote of confidence to our management team. This decision
reflects their support of our initiatives to both maximize the value of our
properties and close the gap between our net asset value and our stock price.
The support of these Investors has been extremely helpful in allowing our team
the latitude to execute our turnaround plan. As best evidenced by our strong
earnings growth and portfolio improvements, our plan is succeeding and their
support is appreciated.
Acadia Realty Trust, headquartered on Long Island, NY, is a self-administered
equity real estate investment trust structured as an UPREIT, which specializes
in the operation, management, leasing, renovation and acquisition of shopping
centers and multi-family properties. The Company currently owns and operates 57
properties totaling approximately 11 million square feet, primarily in the
eastern half of the United States. Acadia's executive offices are located in
Manhattan.
Certain items in this press release may constitute forward-looking statements
within the meaning of the Private Litigation Reform Act of 1995 and as such may
involve known and unknown risk, uncertainties and other factors which may cause
the actual results, performances or achievements of Acadia to be materially
different from any future results, performances or achievements expressed or
implied by such forward-looking statements. Such forward-looking statements
speak only as of the date of this document. Acadia expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in Acadia's
expectations with regard thereto or change in events, conditions or
circumstances on which any such statement is based.
